WPP takes control of Korea's second-biggest agency
HONG KONG - WPP Group has taken control of Korea's second-largest advertising agency LG Ad after acquiring a 36% stake in the agency, making it the largest shareholder.
WPP has been in talks for months to buy the stake with talks first being reported six months ago. LG Ad was part of the unlisted LG Group, South Korea's third-largest conglomerate, and is estimated to be worth around £91m.
The decision to invest in Korea despite the downturn is based on long-term growth prospects in Asia's third-largest advertising market, worth £3.5bn. A recent survey revealed that agencies in emerging markets, especially those in Asia, were riding out the advertising downturn with more success than those agencies operating in established markets.
Sir Martin Sorrell, chief executive officer of WPP, said the investment was motivated by Korea's evident economic success. "We have been relatively under-represented in Korea, and this investment reflects our wish to remedy that. We had always hoped that LG Ad could be our partner and very much admire their professionalism, sound management and advertising product."
He added: "It also allows us to take the experience of Korea -- as perhaps the market in the world which is most successfully developed in terms of the integration of the internet broadband and conventional media -- to the rest of the world."
LG Ad had revenues of £29.9m in 2001 and employs more than 500 people. Its major clients include LG Electronics, LG Chemical, LG Telecom, LG Group, Korean Air, Daehan Investment & Trust and Nike.
The investment in LG Ad will be jointly managed by WPP's agency networks Ogilvy & Mather Worldwide and Young & Rubicam Advertising. Senior executives of both agencies will be nominated to join the LG Ad board.
In-Ho Lee, chief executive officer of LG Ad, said: "This partnership will not only strengthen our position in Korea but provides us with a first-class global network that can support our clients' rapid expansion."
LG Ad joins a growing WPP presence in Korea. It already has Korean offices for Ogilvy & Mather: Dentsu Young & Rubicam: JWT/AdVenture; media specialists Mediaedge:CIA and new-media experts OgilvyInteractive; information and consultancy company Research International; public relations firms Ogilvy & Mather Public Relations Worldwide and Merit/Burson-Marsteller; branding and identity firm Landor Associates; and promotions specialists Maxx Marketing.
The agency is being sold off ahead of a flotation by the LG Group next year. Young-Soo Kim, executive vice-president at LG Electronics, the largest client of LG Ad, said: "LG Electronics anticipates that the partnership will benefit LGE's global communications campaign."
The acquisition follows a number of other acquisitions in the region earlier this year. WPP acquired Chinese PR agency H-Line, which will make it one of the biggest agencies in the People's Republic of China; direct marketing firm BrandOne in China; and a stake in Japan's largest PR agency, PRAP.
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